Thinking Inside the Box

A Paddocks Sectional Title Lifestyle Blog

Fining Rules in Home Owners’ Associations

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By Carryn Melissa Durham

Recently I wrote an article on Fining Rules in Sectional Title Schemes. This article will deal with the validity of a penalty rule and the validity of the fine implementation. Although many of the principles remain the same, I will address the important principles that relate to home owners’ associations (“HOAs”).

In the next discussion, I will focus on an HOA that is created as common law association, and that is governed by a Constitution. It is important to note that if there is also no provision in the Constitution for the payment of penalties or fines for contraventions of the Constitution, the Architectural Guidelines or the House/Conduct Rules, then the HOA cannot impose a fine. The Association gains its authority to exercise all of its powers from the Constitution.

In a Western Cape High Court Judgement Kenrock Homeowners Association v Allsop and Another (A224/2011)[2012] ZAWCHC 31 (28 March 2012), it was argued by the respondent in paragraph 22 that:

The appellant [the Board/Association] derives all its powers from its constitution and if that instrument does not prescribe such a power, the association cannot exercise such power.

In this regard the respondent relied on LAWSA: Associations Vol 1 (2nd edition) at paragraph 620 where the following is stated:

The constitution of an association together with all the rules or regulations collectively constitute the agreement which is entered into by its members. This agreement is the crucial factor in the existence of an association. It not only determines the nature and scope of the association’s existence and activities but also, where necessary, prescribes and demarcates the powers of, inter alia, the executive committee, secretary and general meeting, expresses and regulates the rights of members and provides for certain procedural aspects.

In the Kenrock case, the Board had issued recurring penalty levies on a home owner who was in breach of his obligations, whereas the Constitution only allowed for a single penalty levy. Bozelek J and Henney J found that:

“In our view, in the absence of a clear provision in the constitution empowering the appellant [the Board/Association] to impose a penalty levy in appropriate circumstances, it does not possess the power to do so. It follows that the appellant misconstrued its authority to impose a penalty levy and may even have confused it with a provision authorising the imposition of a sanction or penalty in terms of clause 14.2 of the Kenrock Agreement of Sale. Whatever the case, it acted outside of its powers in purporting to impose a penalty levy under the guise of imposing a fine in terms of clause 11.2.3. Ultimately, having regard to the evidence as a whole the appellant failed to make out a prima facie case that it possessed the power to impose any penalty levy upon the respondents.”

Therefore, the Constitution of the HOA needs to be amended in conformity with its amendments clause to include the authority of the Association or Trustees to make a fining rule. I do not recommend making the fine dependant on specific breaches as it is never possible to set out all the possible contraventions or breaches. Therefore, I suggest a fining rule that can be used for any breach or contravention of the Constitution, Architectural Guidelines or the House/Conduct Rules.

Another case that dealt with fines in HOAs was Van Rooyen v Hillandale Homeowners Association (1603/2014) [2014] ZAFSHC 226 (11 December 2014). This case dealt with an HOA that is registered as a non-profit company. The question to be answered was whether an HOA could restrict a tenant’s access to services if the owner is in arrears with levies, and whether the HOAs conduct in limiting/refusing the applicant to purchase pre-paid water and electricity vouchers was lawful. The applicant leased a property within the Estate from an owner/landlord. The respondent was the HOA. With regard to the aesthetical appearance of the Estate, the rules provide that the board can impose fines on those persons who do not conform with the guidelines, after being given the reasonable opportunity to rectify the problem.

The HOA imposed penalties on the owner-landlord for non-compliance with the aesthetic guidelines. As a result of the owner’s unpaid fines, the tenant’s access to purchasing electricity and water vouchers from the HOA was restricted. During March 2014, the applicants internet site for the purchase of electricity was blocked, and he was forced to purchase same from the administration offices of the HOA during office hours. The administrative staff refused and/ or restricted the purchase of electricity to units that would last him for a few days. It was held that the tenant had locus standi to approach the court in respect of his possession, and that the rights were capable of protection by the manadament van spolie. However, it was decided that the HOA’s conduct was not unlawful as it acted within the rules and the agreement it entered into with the owner. The rules and water and electricity supply agreement clearly provided that no electricity would be provided or sold to any occupier or owner if levy payments were outstanding. The owner’s failure to adhere to the aesthetical rules triggered the imposition of penalties which remained unpaid. The owner voluntarily bound itself to these rules when buying the property, and the tenant also voluntarily chose to abide by the rules when deciding to enter into a lease agreement with the owner. The owner and tenant contractually agreed to forfeit certain rights to his property. The HOA’s conduct was therefore not unlawful as it acted within the rules and the agreement it entered into with the owner. The conduct of the HOA did therefore not amount to spoliation and the application failed.

If you have been fined, or are a body corporate that wants a penalty rule drafted, then please contact us at consulting@paddocks.co.za or call us on 021 686 3950.

Image source: wastecare.co.uk

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